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Accounting for the Diversity of Rural Income Sources in Developing Countries: The Experience of t h e RIGA Project

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Accounting for the Diversity of Rural Income Sources in Developing Countries: The Experience of t h e RIGA Project. Katia Covarrubias, Ana Paula de la O & Alberto Zezza ESA Wye City Group Meeting on Statistics on Rural Development and Agriculture Household Income Rome, June 11-12, 2009.

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Accounting for the Diversity of Rural Income Sources in Developing Countries: The Experience of the RIGA Project

Katia Covarrubias, Ana Paula de la O & Alberto Zezza

ESA

Wye City Group Meeting on Statistics on Rural Development and Agriculture Household Income

Rome, June 11-12, 2009

the rural income generating activities project
The Rural Income Generating Activities Project
  • Database of 34 living standards surveys
  • Outputs:
    • Income Aggregates
    • Household Level Indicators
      • Access to capital
      • Demographic indicators
      • Additional analysis-specific indicators
  • Methodological Goal: Consistency and Comparability
riga data 34 survey countries
RIGA Data: 34Survey Countries
  • Africa
    • Ghana GLSS (1992, 1998*)
    • Kenya KIHBS (2005)
    • Madagascar EPM (1993, 2001)
    • Malawi IHS (2004*)
    • Nigeria (2004*)
  • Asia
    • Bangladesh IHS (2000*, 2005)
    • Cambodia SES (2004)
    • Indonesia FLS (1992, 2000*)
    • Nepal LSS (1996, 2003*)
    • Pakistan HIES (1991, 2001)
    • Vietnam LSS (1992, 1998*, 2002*)
  • Eastern Europe/Central Asia
    • Albania LSMS (2002, 2005*)
    • Bulgaria IHS (1995, 2001*)
    • Tajikistan LSMS (2003*, 2007)
  • Latin America
    • Bolivia EH (2005)
    • Ecuador ECV (1995*, 1998)
    • Guatemala ENCOVI (2000*, 2006)
    • Nicaragua EMNV (1998*,2001*)
    • Panama ENV (1997, 2003*)

* Labor Data also Available at the Individual and Job Levels

income aggregates defining income
Income Aggregates: Defining Income

Income must:

  • Occur regularly
  • Contribute to current economic well-being (available for current consumption)

Income must not:

  • Arise from a reduction in current net-worth
  • Arise from an increase in household liabilities

Source: ILO, Resolution I “Resolution concerning household income and expenditure statistics”

Available from: http://www.ilo.org/public/english/bureau/stat/download/res/hiestat.pdf

income aggregates basic characteristics
Income Aggregates: Basic Characteristics
  • Household-level
    • Labor data also available at the Job and Individual levels
  • Annual
    • Wage income data: also for daily and monthly time frames
  • Net of costs
  • Purchases and sales of durables, investments and windfall gains excluded
  • Local currency units
  • Rural (and urban)
  • Outlier checks
components of total household income
Dependent

Wage Income

agricultural

non-agricultural

Independent

Crop

Livestock

Self Employment

Transfers

public

private

Other Sources

Components of Total Household Income
total household income classifications
Total Household Income Classifications

Total Income:

Agricultural: Agwge + Crop + Livestock

Non-agricultural: Nonagwge + Selfemp + Transfers + Other

On-farm: Crop + Livestock

Off-farm: Agwage + Nonagwge + Selfemp + Transfers + Other

Non-farm: Nonagwge + Selfemp

total household income
Crop

Agwage

Livestock

Transfer

Other

Nonagwage

Selfemp

Total Household Income

Agricultural

On-farm

Off-farm

Non-Agricultural

Non-farm

dealing with costs
Dealing with Costs

Issue: Dealing with investment/durables expenditures

  • Misclassification: bias total income
  • Example: raw materials purchases (Albania; Vietnam)

Recommendations:

  • Clear classification of costs in survey instrument
  • Appropriate choice of reference periods and frequencies
gross versus net
Gross versus Net

Issue: Inconsistent reporting & estimation of gross/net income

Recommendations:

  • In Qx: deductions and taxes should be asked about and reported
  • In income estimation:
    • Net: agricultural, self-employment and wage income
    • Gross: rental income and transfer income
issues and lessons learned12

Issues and Lessons Learned

Questionnaire Design

reference periods
Reference Periods

Issue: Defining appropriate reference periods

  • Choice of Short v. Long
    • seasonal fluctuations
    • relevance to recall error
    • link to survey timing
    • phrasing of questions

Recommendations:

  • Reference periods should reflect frequencyof Inc/Exp
  • Short: Regular or frequent sources (food exp, wages, etc.)
  • Long: Infrequent sources (business costs; ag inputs, etc.)
units coding
Units & Coding

Issue: Comparability and Standardization of Units and Coding

  • Variability of unit reporting
  • Lack of equivalence scales in data and documentation
  • Inconsistency in units and codification of items across survey modules
    • Agricultural Production and Food Expenditure modules

Recommendations: YES to local unit reporting but:

  • Inclusion of equivalence scales
  • Consistency in codification within/across survey modules
lessons learned

Lessons Learned

From Key RIGA Results

on farm income falls and non farm rises
On-farm income falls and Non-farm rises...

...with increasing per capita GDP levels.

riga results diversification of rural household income
RIGA Results:Diversification of Rural Household Income

Defining Specialization and Diversification:

  • Specialization >= 75%
  • Diversification <75%

Influenced by survey timing and reference period:

  • seasonal diversification
  • individuals member diversification
on farm specialization falls with pcgdp
On-farm specialization falls with PCGDP

...but Non-agricultural wage specialization rises.

riga results defining the agricultural household
RIGA Results: Defining the Agricultural Household
  • “Rural” as “Agricultural”
    • lack of data to create comparable rural definition
    • urban agriculture
    • dwelling versus job location
    • diversity of rural economy
  • Thresholds of income
    • Non-zero (basic participation)
    • Higher cut-offs
  • Occupation of the household head
riga results s ensitivity and criteria in agricultural households definition
RIGA Results: Sensitivity and Criteria in Agricultural Households Definition

Source: Aksoy, et al. (2009)

summary and conclusions
Summary and Conclusions
  • Estimation of Income
    • Various approaches for characterizing household income
    • Costs classification
    • Reporting of deductions/taxes relevant
  • Questionnaire Design:
    • Reference periods should reflect frequencyof income and expenditures
    • Need for equivalence scales/conversion factors
    • Unit and coding consistency within surveys.
  • Analysis:
    • Different definitions of agricultural household exist; generate differing characterization of results
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